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Economic Growth And Income Inequality In Sub-Saharan African Countries: A Test Of Kuznets’ Hypothesis

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  • Nicholas M Odhiambo
  • Talknice Saungweme

Abstract

In this study, the influence of economic growth on income disparities in 29 sub-Saharan African (SSA) countries is investigated for the period 2005–2015. The primary objective of the study is to empirically test Kuznets’ hypothesis, which holds that there is an inverted U-shaped relationship between economic growth and income inequality. The study examined this relationship using four proxies for income inequality: the composite inequality index, the Atkinson index, the Gini coefficient, and the Palma ratio. Using a modified version of a difference generalised method of moments (GMM) estimation technique, it was found that regardless of the proxy used to measure income inequality, there is a consistently significant negative relationship between income per capita (y) and income inequality in the countries under study. A consistent positive relationship was also found between the square of income per capita (y2) and income inequality across all the proxies used in the study. The study found that the relationship between economic growth and income inequality follows a U-curve. The result suggests that while economic growth initially lowers income inequality, inequality eventually rises in tandem with growth. This suggests that the bulk of the studied economies in the SSA region are situated on the downward portion of the U-curve. The policy implications are discussed.

Suggested Citation

  • Nicholas M Odhiambo & Talknice Saungweme, 2024. "Economic Growth And Income Inequality In Sub-Saharan African Countries: A Test Of Kuznets’ Hypothesis," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 69(240), pages 7-30, January –.
    • Handle: RePEc:beo:journl:v:69:y:2024:i:240:p:7-30
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic growth; income inequality; Kuznets’ hypothesis; sub-Saharan Africa; GMM approach;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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